The useful life of a plant asset is:
a. The length of time it is productively used in a company’s operations.
b. Its productive life, but not to exceed one year.
c. Determined by the FASB.
d. Never related to its physical life.
Marks Consulting purchased equipment costing $45,000 on January 1, Year 1. The equipment is estimated to have a salvage value of $5,000 and
an estimated useful life of 8 years. Straight-line depreciation is used. If the equipment is sold on July 1, Year 5 for $20,000,
the journal entry to record the sale will include a:
a. Debit to loss on sale for $10,000.
b. Debit to accumulated depreciation for $22,500.
c. Credit to loss on sale for $10,000.
d. Credit to cash for $20,000.
Beckman Enterprises purchased a depreciable asset on October 1, Year 1 at a cost of $100,000. The asset is expected to have a salvage value of $20,000
at the end of its five-year useful life. If the asset is depreciated on the double-declining-balance method,
the asset’s book value on December 31, Year 2 will be:
d. $42,000 -+-+-+-+-+-+-+-+-+-+-+-+-+-+-+-+-+-+-+-+-+-+-+-+-+-+-+ Please Solve As soon as
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AnswerThe useful life of a plant asset is: Answer – a. The length of time it is productively used in a company’s operations. -Useful life is also service life, not as long as total productive life
-Not determined by FASB
-It cannot exceed its physical life Marks Consulting Answer – b Debit to Accum Dep 22,500 Life = 8 years
Cost = 45,000
Salvage value = 5,000
Depreciation (45,000 – 5,000) / 8 = 5,000 per year
For 4.5 years depreciation = 5,000 X 4.5 = 22,500 Beckman Enterprises Answer = b 54,000
Year 1 = 100,000 – (100,000 X 40% X 3/12) = 90,000
Year 2 = 90,000 – (90,000 X 40%) = 54,000